Datamonitor Healthcare

Pharma intelligence |

Market Access Trends

in the US, Europe, and
Emerging Markets
Author:
Datamonitor Healthcare

Introduction
Rising drug spending and increased desire for expenditure controls are consistent themes across
the US, Europe, and emerging markets. With governments and private healthcare systems under
increasing pressure to fund high-cost, innovative therapies, which often launch with limited clinical
trial evidence, payers are looking towards new and enhanced reimbursement processes which
align drug funding with patient value. Based on these growing demands, the healthcare policy
environment remains fluid, with payers introducing increasingly restrictive cost-control mechanisms
in order to limit the burden on constrained healthcare budgets. For pharmaceutical manufacturers,
success will require increasing flexibility on price and the ability to adapt to new access scenarios
brought about by changing access dynamics and geographical differences.

Pricing pressures are present in all surveyed
markets, with payers either looking to introduce
new mechanisms or enhance existing ones to
control healthcare spending. While the majority
of European markets have existing processes to
control drug prices, national healthcare authorities
are continually looking to sharpen these tools in
response to changing market dynamics. In contrast,
with a fragmented healthcare system and lack
of formal health technology assessment process,
mechanisms for price control are relatively absent
in the US. However, with rising drug spending and
high out-of-pocket costs, public appetite for action
on prescription drug prices is strong, resulting in a
proliferation of new healthcare policies, growing
demand for value-based pricing, and increased
transparency within the pharmaceutical supply
chain.
Although sales of branded medicines have typically
been driven by self-funding in emerging markets,
governments are under growing pressure to provide
patients with access to innovative, and sometimes
life-saving drugs. While subsidized access to
more innovative medicines is being pursued in a
number of emerging markets, it is accompanied by
greater pricing controls and growing use of more
sophisticated cost-control mechanisms.

Figure 1: Market access policy changes across the US, Europe, and emerging markets

US Europe Emerging markets

Growing demand for Expansion of scope of

Increasingly tough line
Pricing pricing controls and price
on pricing negotiations
drug price controls and
transparency tighter limits

Growing number of
Nascent, but growing
Rising prominence drugs subject to HTA
Health technology use of HTA as a means
of ICER (value-based procedures.
assessment (HTA) assessments) Increasing clinical
of controlling both prices
and access
evidence demands

Tighter payer controls, More restrictive

Limited expansion of
Reimbursement including formulary reimbursement
existing public programs
exclusions conditions

Source: Datamonitor Healthcare

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US
The demand for value-based pricing grows as drug spending continues to soar
in the US

Drug prices in the US have been the subject of significant debate over the past few years, following
a surge in spending on prescription medicines, and substantial yearly price increases in some
categories. President Donald Trump, who took office in January 2017, has vowed to intervene and
tackle rising drug spending, highlighting increased transparency between different players in the
pharmaceutical supply chain as a key action point. While several reforms have been proposed, the
implications and feasibility of the changes are currently unknown. Nonetheless, growth in drug
spending has significantly raised the requirement for drug manufacturers to justify the prices of their
therapies, with increasing demand for value-based pricing mechanisms such as outcomes-based
contracts, and cost-effectiveness assessments.

Several drug pricing policies have been proposed
under the Trump administration, including
international price indexing to European countries,
and the elimination of safe harbors which enable
pharmacy benefit managers (PBMs) to negotiate
confidential discounts with manufacturers for
Medicare- and Medicaid-covered therapies. These
proposals could have far-reaching implications
for manufacturers, plans, PBMs, pharmacies, and
beneficiaries – however, it is currently difficult to
predict what these consequences will be, or whether
these reforms can legally be introduced.
Considering the growing public scrutiny of drug
pricing policies, and the increased use of cost-
effectiveness methods by payer organizations,
value-based pricing is high on the agenda in the US.
So far, value-based pricing efforts have primarily
taken the form of outcomes-based contracts
(OBCs), with insurance companies negotiating
these agreements for a wide range of different
therapies. However, with the exception of curative
therapies, payers and policymakers seem to be
unconvinced of the long-term cost savings these
agreements provide. As drug prices continue to
soar, the Institute for Clinical and Economic Review
(ICER), a US-based organization which assess the
comparative effectiveness of therapeutics, has been
gaining considerable attention. While most payers
are yet to formally incorporate ICER findings in their
reimbursement decisions, its value assessments
have begun to have an indirect impact on drug
prices, and many believe the organization will have
increasing influence in the future as the demand for
value-based pricing grows.

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 3

Drug pricing debate
The Trump administration has proposed several
reforms to tackle rising drug prices
Several drug pricing reforms have been proposed
by the Trump administration over the past year,
triggering intense speculation about the shape
and reach of potential new price controls. In May
2018, the administration published a blueprint
identifying key challenges in the American drug
market and proposing a number of reforms to
address these issues. Key challenges include
high list prices, senior and government programs
overpaying for drugs due to a lack of negotiating
“I think we will have to change administrations quite frankly, I do not see anything
happening in terms of healthcare until the end of the Trump administration.”
US payer
Figure 2: Key challenges identified in Trump’s 2018 Drug Pricing Blueprint
High list prices
Challenges
Lack of negotiating
power for government
programs
1. HHS (2018) American Patients First. Available from: https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf [Accessed 27 February 2019].
4 / March 2019
power, high and rising out-of-pocket (OOP) costs,
and lastly, foreign governments “free-riding” off US
investment in innovation1. Based on these identified
issues, proposed reforms include international price
indexing (IPI) to European countries and increased
negotiating power for Medicare plans (see the table
below for further information). While there seems
to be true bipartisan support for action on lowering
drug prices, which of these proposals are likely to
take effect, and what the long-term impact of these
changes will be, is currently unknown. Several payers
interviewed by Datamonitor Healthcare are skeptical
about the chances of any meaningful change being
implemented under the current administration.
European governments
free-loading off
US investment in
innovation
High out-of-
pocket costs for
beneficiaries
Source: Datamonitor Healthcare
© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)
Figure 3: Pricing reforms proposed under the Trump administration

Proposal When? Impact?

Removal of the safe harbor Proposed: 1
exemption for rebates February 2019
negotiated between PBMs,
payers, and manufacturing
companies for Medicare Part D
and Medicaid-managed care
covered drugs
“International price indexing”
of Medicare Part B therapies
to European markets
Medicare Advantage
plans allowed to impose
step therapy restrictions
and negotiate prices
with pharmaceutical
manufacturers for drugs
reimbursed under Part B
Prohibition of pharmacy gag Passed:
clauses which bar pharmacies September
from telling patients about 2018
less-expensive treatment
options
Insurance companies
permitted to exclude and
restrict the reimbursement of
therapies in Medicare Part D
protected classes
This plan is likely a positive step forward, but payers do not
expect the impact to be significant. Medicare and Medicaid
beneficiaries with high drug costs will likely benefit from
these reforms, however, the shift could also result in higher
insurance premiums for all beneficiaries.
Proposed: The proposal for IPI has been met with widespread criticism
October 2018 from industry, patient groups, and health economists who
suggest that the plan will not yield significant reductions
in US pharmaceutical prices but could negatively impact
access to therapies in Europe. Payers are skeptical as to
whether this policy will be passed considering the significant
criticism it is facing.
Passed: 2018 Significant rebates will likely only be negotiated for therapies
approved in highly competitive indications, in which there is
limited differentiation of products. Furthermore, the impact
of these new rules will be limited by the fact that only 35%
of Medicare patients are covered by Medicare Advantage
plans.
While this legislation is only expected to have a small
positive impact on patient costs, it is certainly a step in the
right direction for patients.
Proposal due This reform could have a substantial impact on the pricing
to be finalized of therapies in the Medicare protected drug classes, which
in April 2019 are often highly expensive. However, critics argue that these
changes could reduce patient access to drugs treating high-
risk and life-altering diseases. This proposal is expected to
face significant pushback from patient groups and members
of Congress.

IPI = international price indexing; PBM = pharmacy benefit manager

Sources: 2,3,4,5

2. Pink Sheet (2019) Available from: https://pink.pharmaintelligence.informa.com/PS124678/No-More-Rebates-HHS-Proposed-Rule-Revises-AntiKickback-

Safe-Harbor [Accessed 27 February 2019].
3. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS124144/Medicares-Foreign-Price-Benchmarking-Will-Only-Hurt-Bad-
Negotiators-HHSs-Azar-Argues [Accessed 27 February 2019].
4. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS123711/Medicare-Part-B-Step-Therapy-Policy-May-Get-Further-
Guidance-From-HHS [Accessed 27 February 2019].
5. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS123853/Pharmacy-Gag-Clause-Bills-Another-Simple-Fix-For-Drug-
Pricing-That-Is-Not-So-Simple [Accessed 27 February 2019].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 5

Backlash from stakeholders reduces the
chances that international price indexing will
be introduced
The Trump administration’s proposal to
internationally price index Medicare Part B products
against prices in Europe is one of the most extreme
to date, with the reform facing extensive pushback
from numerous stakeholders. This proposal has
been formed off the back of statements from the
Department of Health and Human Services (HHS)
and the Council of Economic Advisers (CEA), which
have accused European nations of “freeloading”
off high US drug prices. The CEA report suggests
that innovation in the EU is not impacted by
pricing, and therefore payers in member states can
use various restriction methods to keep prices of
pharmaceuticals just above marginal cost, including
cost-effectiveness methods or reference pricing
policies6. The report concludes that meaningful
reforms could address the free-riding that takes
unfair advantages of American innovation, whether
through enhanced trade policy, or by tying public
reimbursement in the US to prices paid by foreign
governments.

Figure 4: Proposed method for introducing international price indexing

The proposed IPI model would incorporate two main elements

• Replace the current buy and bill system
for Medicare Part B drugs, under which
manufacturers are reimbursed based on a
drug’s ASP + 6%, with a modified version of
CMS’s previous competitive acquisition program.
• Reference the reimbursement price of
Medicare Part B drugs to prices paid in 14
other developed European countries. The
model’s aim is to reduce ASP by 30% in
aggregate over a five-year period.

• Hospitals would enrol with private sector IPI

vendors, which would acquire and provide Part
B therapies for administration, and bill Medicare
Part B for the drug itself. Hospitals would
then bill Medicare part B only for the drug’s
administrations and a fixed “drug
add-on payment”.

ASP = average selling price; CMS = Centers for Medicare & Medicaid Services; IPI = international price index

“There is really very little said about actual value. It basically says oh, we are just
going to accept the evaluations that are created by other entities, whether they
have a different set of values, whether it is a bigger or smaller problem in their
country, and it does not really reflect what we are doing here in the States.”
US payer

6. Whitehouse (2018) Reforming Biopharmaceutical Pricing at Home and Abroad. Available from: https://www.whitehouse.gov/wp-content/
uploads/2017/11/CEA-Rx-White-Paper-Final2.pdf [Accessed 27 February 2019].
7. Federal Register (2018) Available from: https://www.federalregister.gov/documents/2018/10/30/2018-23688/medicare-program-international-
pricing-index-model-for-medicare-part-b-drugs [Accessed 27 February 2019].

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The proposal for international price indexing has
been met with significant criticism
The proposal for IPI has been met with significant
criticism from the pharmaceutical and biotech
industries (including the lobbying bodies; the
Pharmaceutical Research and Manufacturers
of America and the Biotechnology Innovation
Organization), hospitals, patient groups, and health
economists8. Based on these criticisms, and the
significant legal changes required for this reform
to take place, interviewed payers are skeptical as
to whether the bill will be passed. Major points of
criticism include:
• Reduced access to drugs in the US
Pharmaceutical lobbyists and patient groups
argue that this reform will jeopardize access
to medicines for US citizens and discourage
innovation in healthcare. Patients in the US obtain
the fastest and widest access to therapies in any
developed country, and if passed, these policy
changes would likely reduce patient access in line
with European counterparts.
• Higher list prices in Europe, but higher
rebates also
While this regulation could result in
pharmaceutical companies setting higher list
prices in Europe, critics suggest the overall
net price impact is expected to be nominal as
governments and health technology assessment
(HTA) agencies would reactively negotiate higher
confidential discounts. Furthermore, the worst-
case scenario would be that manufacturing
companies abandon the European markets
altogether, in order to avoid reference pricing to
lower-income countries9.
• Overly simplistic attempt at introducing value-
based pricing through the “back door”
Critics suggest that this proposal is an attempt
to bring value-based pricing in through the back
door in the US. They highlight that value-based
pricing of pharmaceuticals should be a highly
nuanced, multi-stakeholder process, reflecting the
willingness-to-pay and budget constraints of the
country in question. Linking US prices to countries
with completely different healthcare systems,
budget priorities, and expenditure limits goes
against the concept of value-based pricing and
would likely have a negative effect on research
and development, with limited overall impact on
global pharmaceutical expenditure9.

“The mechanism does not account for drugs that are not in the index, if you have
a new drug and you introduce it into the United States first, then you cannot index
it because there is nothing to index against. […] so, companies will introduce in the
US first at very high prices and do that for a year until they get into Europe.”
US payer

8. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS124144/Medicares-Foreign-Price-Benchmarking-Will-Only-Hurt-Bad-

Negotiators-HHSs-Azar-Argues [Accessed 27 February 2019].
9. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS124289/Could-Trump-Pricing-Policy-Mean-Higher-Prices-In-Europe
[Accessed 27 February 2019].

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Prohibiting rebate negotiations for Medicare
Part D drugs may have a positive impact on
beneficiaries with high OOP costs
HHS has announced a proposal that would eliminate
the drug rebate process between PBMs, payers,
and manufacturing companies for Medicare Part D
and Medicaid-managed care covered drugs, aiming
to increase transparency in the supply chain, and
encouraging discounts to go directly to patients.
Under the new plans, PBMs would get a flat fee from
manufacturing companies for including drugs on
their plans. HHS believes that by removing the need
for manufacturing companies to offer increasing
rebates to PBMs in exchange for formulary inclusion
and preferable tier positioning, there will be less
incentive to hike list prices up year-on-year. This rule
would also create a new so-called “safe harbor”
for drug discounts to be passed onto patients at
the pharmacy counter, reducing overall OOP costs.
Manufacturing companies and pharmaceutical
lobbying groups have expressed significant support
for these proposals10.
While it is far from certain whether the safe harbor
exemption can be easily lifted in 2019, and whether
this proposal would actually result in lower drug
prices, there seems to be bipartisan support for
increased transparency within the rebate system.
It is likely that those Medicare and Medicaid
beneficiaries with high drug costs, who have not
yet met their deductibles, or have co-insurance
based on a percentage of a drug’s list price, will
benefit from these reforms. However, the shift could
also result in higher insurance premiums for all
beneficiaries as plans stop applying manufacturer
rebates to reduce these payment obligations.
Overall, it is expected that certain beneficiaries will
see net cost reductions, but the increased costs and
savings will not be evenly distributed.
Value-based reimbursement
With growing public scrutiny over high drug prices,
the demand is increasing for manufacturing
companies to justify the costs of their therapeutics
based on the patient benefit they provide. Unlike in
many European markets, the US healthcare system
does not have a formal HTA or reimbursement
body which assesses the clinical effectiveness and
economic value. Formulary decisions are dictated
by numerous different stakeholders, including PBMs,
individual health plans, and government-funded
agencies (eg Medicaid and Medicare), all of which
employ different methods to regulate patient access
to therapeutics. Payers in the US report very minimal
ability to negotiate prices for high-impact drugs,
especially in oncology and other indications where
there are limited alternative treatment options.
Payers’ inability to negotiate prices based on a drug’s
perceived clinical and cost-effectiveness levels,
along with the fragmented healthcare system, has
heavily contributed to soaring drug prices in the
US. Payers and decision-makers express increasing
desire for new methods of value-based pricing,
however, there is currently minimal consensus over
the appropriate next steps.
Payers utilise OBCs in the US, but are yet to be
convinced of their value
The main way pharmaceutical companies have
engaged in value-based reimbursement in the US
has been through product-specific OBCs penned

“These [OBCs] do not save money, it is really a pretence, if the drug does not work they
stop taking it, if the drug works well they take it longer, the patient does better and
the company does better because they get more money, and if they think the drugs
are overpriced, rather than create this crazy value-based pricing exercise to reduce the
cost a little bit, just reduce the cost upfront and save everybody all the work.”
US payer

10. Pink Sheet (2019) Available from: https://pink.pharmaintelligence.informa.com/PS124678/No-More-Rebates-HHS-Proposed-Rule-Revises-

AntiKickback-Safe-Harbor [Accessed 27 February 2019].

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with individual health plans. In outcomes-based
models, innovator companies are paid for their
therapies based on mutually agreed-upon timed
measures and achievements of clinical performance
or outcomes in the real world. If those goals are
not met, the companies are not reimbursed, or
are only partially reimbursed. Such deals have
mainly been employed in competitive drug classes,
demonstrating a divergence from the European
trend of utilizing risk-sharing deals mainly in
oncology. However, many payers lack the belief in
the value of OBCs, viewing such deals as little more
than positive public relations exercises from Pharma.
In order to be convinced to utilize OBCs more widely,
payers want to see evidence that OBCs create value
savings that outweigh their administrative costs
or savings that could be generated through simple
rebate deals.

“[OBCs] are a reasonable and fair approach to take… if we are going to spend $850,000
on a treatment, we need some assurance it is going to work… and should not be
paying a significant expense for a patient when the product actually did not work.”
US payer

One exception seems to be curative therapies
While payers express concern surrounding the
long-term value obtained from OBCs in general, one
exception seems to be curative therapies. Many US
payers agree that risk-sharing/pay-for-performance
deals are going to become the norm for gene
therapies in the future and should work well given
the high upfront costs, uncertainties around efficacy,
and relatively small patient populations. The main
benefit of the performance-based approach for
payers is that the risk is put onto the developers,
which is highly relevant for cell and gene therapies
which often only have limited safety and efficacy
data available at the time of launch. If the therapy
does not work, the payer does not pay. This type of
program is easier to integrate into existing payer
systems where patients stay enrolled for a long
time, such as with the US government programs
Medicare or Medicaid. Another feature that could
help with implementation is the use of patient data
registries for products that need to comply with
post-marketing surveillance, making it easier to
track performance outcomes. For these reasons,
pay-for-performance models are ideal for therapies
that have some well-defined measures of benefit in
clinical trials, or have outlined ways to predict clinical
benefit that can be easily measured.

“I think gene therapy, if it does not work why should you pay for it? With things like
that I can see it... If it is a binary, quick answer with a very expensive drug – maybe.”
US medical director

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Rising influence of ICER
As the demand for value-based pricing increases,
ICER, a US-based organization which assess
the comparative effectiveness of therapeutics,
has been gaining considerable traction. Funded
primarily by non-profit foundations, ICER acts as an
independent body which assesses the value that
a drug or medical test brings to patients and the
healthcare system, calculating a value-based price
benchmark range that aims to facilitate discussions
between payers and manufacturers. In alignment
with national HTA bodies in the UK and Canada,
ICER utilizes the incremental cost-effectiveness
ratio, which is a standardized cost-effectiveness
ratio that expresses dollars per quality-adjusted life
years (QALYs) gained, to determine the value-based
price of an intervention based on its demonstrated
patient benefit. However, whereas NICE in the UK
and CADTH in Canada have set thresholds upon
which reimbursement decisions are based, ICER
has no such remit, and instead acts as an advisory
body providing maximum cost-effective prices for
therapies relative to several different thresholds.

“At the end of the day, most of that [ICER analysis] is almost a wasted exercise because
we cannot change the price once it is announced, we cannot change what we are going
to have to pay for the product based on whatever contracts we have in place.”
US payer

The majority of payers are yet to formally
incorporate ICER reviews within their
reimbursement processes
While payers would like to leverage findings from
ICER reports in order to manage spending on
therapeutics, they highlight certain issues which
prevent widespread adoption. These include lack
of assessments for all drugs, delays in publishing,
methodological/transparency problems, and the fact
that the agency is independent and non-regulated.
Based on these factors, few payer organizations
formally utilize ICER reviews in their reimbursement
processes. Nonetheless, ICER seems to have at
least an indirect impact on pricing as companies
increasingly seek to avoid the negative publicity
they tend to get if their product is judged to be
overpriced by ICER. For example, Sanofi/Regeneron
collaborated with ICER prior to the launch of the
atopic dermatitis drug Dupixent (dupilumab), in
order to develop a cost-effective pricing strategy for
the novel biologic11. The manufacturing companies
also agreed to cut the price of the cholesterol-
lowering therapy Praluent (alirocumab), to a level
ICER deemed cost-effective, in exchange for the
removal of payer reimbursement restrictions12. While
ICER reports that other drugmakers have expressed
interest in working with the group in a similar way,
the Praluent and Dupixent reviews so far are the
only specific examples.

11. Pink Sheet (2017) Available from: https://pink.pharmaintelligence.informa.com/PS120351/Sanofi-Regeneron-Setting-New-Paradigm-With-Dupixent-

Pricing-In-US [Accessed 27 February 2019].
12. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS122695/Praluent-Pricing-Collaboration-With-ICER-Sets-A-New-
Standard [Accessed 27 February 2019].

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 “I think there is a lot of interest in what ICER does, and there is a lot more discussion
about the use of cost effectiveness, but it is still going to be a couple of years before
it is widely recognized and being used.”
US payer

CVS Caremark has referenced ICER thresholds in
its self-insured plans
In September 2018, CVS Caremark announced
that it would be instituting a $100,000 per QALY
threshold, based on publicly available ICER
reviews, above which it would deny patient access.
Specifically, the PBM has stated that it will allow
insurance companies to exclude therapies launched
at a price greater than $100,000 per QALY from
their plans, but it will make exceptions for therapies
considered to be “breakthrough”13. Critics of this
decision highlight the arbitrary nature of the
$100,000 per QALY threshold, and further argue that
the process incentivizes manufacturing companies
to launch drugs at the maximum cost-effective
price – a practice which is not aligned to the concept
of value-based pricing14. Nonetheless, considering
the size of the PBM, as well as its recent merger
with Aetna, this move will likely have a considerable
impact on patient access to therapeutics, especially
for high-cost treatments with cheaper or generic
alternatives.
ICER collaborates with NICE and CADTH on
assessment of curative therapies
ICER has recently announced that it will be working
in collaboration with NICE and CADTH, the UK and
Canadian HTA bodies, respectively, to develop and
test different methods that are specifically tailored
for evaluating different types of expensive but
potentially curative treatments and determining
a value-based price15. The project aims to build
consensus across HTA groups in anticipation of a
rising tide of gene therapies and other potential
cures. While there are currently no value frameworks
that specifically address cell and gene therapies,
this collaboration could enhance ICER’s presence
and credibility in the space, paving the way for
future involvement in the value-based pricing and
reimbursement of curative treatments in the US.

13. CVS (2018) Current and New Approaches to Making Drugs More Affordable. Available from: https://cvshealth.com/sites/default/files/cvs-health-
current-and-new-approaches-to-making-drugs-more-affordable.pdf [Accessed 27 February 2019].
14. Pink Sheet (2018) Available from: https://pink.pharmaintelligence.informa.com/PS123662/CVS-Launching-Program-To-Exclude-New-Drugs-Deemed-
Not-Cost-Effective [Accessed 27 February 2019]
15. ICER (2019) ICER Launches International Collaborative to Develop New Methods to Guide Value-Based Pricing of Potential Cures. Available from:
https://icer-review.org/announcements/icer-launches-international-collaborative-to-develop-new-methods-to-guide-value-based-pricing-of-potential-
cures/ [Accessed 27 February 2019]..

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Europe
Rising costs necessitate a change in market access dynamics

Europe’s payers face a thorny problem. As regulators strive to expedite the approval of innovative
medicines, they are being asked to fund a steady stream of new drugs targeting serious, intractable,
and often life-threatening diseases. Most carry hefty price tags, but a growing proportion are backed
by limited clinical data, making it difficult to gauge their true, long-term therapeutic value. Demand
for access to these products is strong, but healthcare finances across the region are under intense
pressure. While authorities in the EU’s five biggest markets have continued to grant reimbursement
for most new drugs, they have also pursued the implementation of measures designed to limit the
impact of coverage decisions on healthcare budgets.

Pressure on healthcare budgets has also seen HTA reach in Europe grows as criteria
haggling over issues such as cost and cost-
effectiveness emerge as an increasingly frequent
become increasingly restrictive
The cost-containment imperative has driven reform
cause of delays in the completion of P&R
of established national HTA procedures in a number
procedures. And restrictive conditions attached
of EU member states since the beginning of this
to the reimbursement of costly new drugs have
decade. In some, this has had a significant impact
affected patient access to such products, acting as a
on market access – especially for innovative, high-
drag on their European revenues.
cost specialty medicines. Across Europe, the number
of drugs subject to health technology assessment
Drug price negotiations with payers are increasingly
is growing, and will continue to rise in the wake of
tough. Recent developments in both the UK and
recent policy developments (see the following table).
France have narrowed negotiation-free pricing
avenues, while German payers are calling for the
Furthermore, as HTA bodies apply increasingly
abolition of free pricing periods.
restrictive approaches to the application of existing
assessment mechanisms, these in turn will have
Although the main cost-containment targets
implications for decisions on the funding, price, and
may be medicines that are linked to large patient
uptake of new drugs. With further change being
populations, orphan drugs have begun facing stiffer
implemented or debated in several countries, the
access challenges in some markets. The scale of
HTA landscape in Europe will remain fluid, forcing
the challenge posed by orphan drugs has increased
manufacturers to tweak existing development
since the beginning of this decade, reflecting moves
and commercialization strategies on a country-by-
by regulators to fast-track authorization for rare
country basis.
disease treatments and a progressive rise in the
proportion of new drugs that boast orphan status.

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Figure 5: Direction of HTA travel in the 5EU

Country Reach Mechanics Outcomes

France No major change
Germany Increasing: Hospital drugs
and some pre-AMNOG
active ingredients are now
subject to G-BA benefit
assessments
Italy No major change
Spain Increasing: The number
of drugs subject to
Therapeutic Positioning
Reports has risen
progressively over the
past five years, while more
pharmaceutical products
are being assessed at
regional and local level
UK Increasing: NICE now
assessing all cancer drugs
and ultra-orphan products
Increasingly restrictive: SMR rating Increasingly restrictive: High
of ‘important’ or ‘major’ and ASMR ASMR scores (I–III) have become
score of I–III now required for
hospital drugs to access the ‘list
en sus’ if their comparator does
not feature on the schedule
No major change
Changing: New algorithm being
used by AIFA to determine the
level of innovation offered by new
drugs
No major change
Increasingly restrictive: Standard
NICE ICER threshold now applied
to oncology products that are
candidates for inclusion in the
Cancer Drugs Fund. Sliding,
QALY-based ICER threshold
being applied to ultra-orphans to
determine NHS commissioning
increasingly elusive
Increasingly restrictive: Payers
are pursuing a more aggressive
approach in negotiations with
manufacturers for drugs with
low added benefit ratings.
Greater flexibility is allowed in
pricing negotiations for some
medicines with no added benefit
following reforms in 2017,
though application is expected
to be in select special cases only.
Changing: Seven of the first 11
products assessed using the new
algorithm were declared ‘non-
innovative’
Increasingly restrictive: Cost
and cost-effectiveness are a
feature of regional and local
assessments, which can inform
both reimbursement and clinical
practice
Increasingly restrictive: Broader
application of ICER thresholds
will see NICE reject standard NHS
funding for more drugs unless
manufacturers give significant
ground on price

5EU = five major EU markets (France, Germany, Italy, Spain, and the UK); AIFA = Italian Medicines Agency; AMNOG
= Pharmaceutical Market Reorganization Act (Arzneimittelmarktneuordnungsgesetz); ASMR = additional medical
benefit; G-BA = Federal Joint Committee (Gemeinsamer Bundesausschuss); HTA = health technology assessment;
ICER = incremental cost-effectiveness ratio; NICE = National Institute for Health and Care Excellence; QALY =
quality-adjusted life year; SMR = actual medical benefit

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 13

New AIFA innovation algorithm will
determine funding as well as HTA
outcomes
In 2017, Italy’s National Medicines Agency (AIFA;
Agenzia Italiana del Farmaco) began working with
a new algorithm that is applied by its Technical
Scientific Committee, the CTS, to determine the
degree of innovation offered by new drugs. The
outcome of CTS assessments will have direct and
significant implications for individual products, with
those deemed “innovative” gaining immediate
access to regional formularies (at least on paper),
and to a share of €1bn ($1.16bn) in annual federal
government funding designed to encourage the
uptake of innovative medicines. Innovative drugs
will also not be exposed to potential repayments
that are often a feature of managed access
agreements negotiated by regulators.
The new approach gauges the therapeutic need and
added therapeutic value offered by a drug, and the
quality of scientific evidence available to support
the evaluation of those two criteria. Therapeutic
need and added therapeutic value are ranked
from “maximum” to “absent,” while the quality
of scientific evidence on which those rankings
are based may be categorized variously as high,
moderate, low, or very low. Based on the outcome
of CTS assessments, a drug will be designated as
either innovative, conditionally innovative, or not
innovative.
Early evidence confirms that added therapeutic
value will be the key to securing innovative status
under the new AIFA algorithm – even where, for
rare disease treatments, the quality of scientific
evidence in support of a drug is not deemed to
be particularly high. By early May 2018, AIFA had
published full details of 11 assessments completed
using the new algorithm. The agency had conferred
innovative status on three of those products,
granted conditionally innovative status to another,
and concluded that the drug in question was not
innovative in the remaining seven cases16.

RESULTS OF THE IMPLEMENTATION OF THE NEW INNOVATION ALGORITHM SO FAR

All three of the drugs granted innovative status were deemed to offer an “important” degree of
added therapeutic value, despite the fact that the quality of evidence in support of that rating
was deemed “moderate” for AbbVie’s Mavyret (glecaprevir + pibrentasvir), and “low” for Biogen’s
Spinraza (nusinersen) and Dompé’s Oxervate (cenegermin). No other drug was deemed to offer
more than “moderate” added therapeutic value. Eli Lilly’s rheumatoid arthritis treatment, Olumiant
(baricitinib), which was the only product deemed to be supported by high-quality scientific
evidence, was gauged not to be innovative on the basis of moderate therapeutic need and low
added therapeutic value16.

16. AIFA (2018) Report di valutazione dell’innovatività. Available from: http://www.aifa.gov.it/content/elenco-aggiornato-farmaci-innovativi-0 [Accessed
1 May 2018].

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New drug prices are under growing have strengthened the hand of payers and
regulators involved in the negotiation of new drug
pressure reimbursement prices.
Unlike in the US, introductory prices for new
drugs seeking reimbursement are subject to
The trend has been most noticeable in France, where
explicit negotiation in France, Italy, and Spain.
there has been a sharp decline in the added medical
Manufacturers are free to set their own launch prices
benefit (ASMR) scores being awarded to new drugs.
in the UK, though they will hit access hurdles if they
This has direct and significant implications on the
do satisfy NICE’s cost-effectiveness criteria, while in
price likely to be achieved by the majority of new
Germany companies may sell drugs containing new
drugs reaching the French market, since only those
active substances at higher list prices for 12 months,
granted ASMR ratings of I–III benefit automatically
after which prices negotiated by manufacturers and
from a “European price guarantee,” under which
statutory health insurance funds apply.
the price authorized in France will not drop below
the lowest price prevailing in the four other 5EU
Where new drug prices are subject to negotiation,
markets in the five years following initial approval for
regulators and payers are pursuing an increasingly
reimbursement.
tough line, while opportunities for manufacturers
to set their own prices – where these exist – are
While they did not enjoy any such price guarantee,
being squeezed in a bid to limit rates of increase in
drugs deemed to offer a minor added benefit
reimbursement spending. Both of these trends are
(ASMR IV) could traditionally expect a modest price
acting as constraints on market access. Haggling
premium over the existing standard of care. That is
over price is delaying the completion of P&R
no longer the case, however, with the ministry of
procedures, while the launch of some new drugs
health having called on the Economic Committee
has been put on hold by manufacturers where they
for Health Products (CEPS; Comité Économique des
believe negotiated prices are unsatisfactory. At the
Produits de Santé) to ensure that new drugs with
same time, regulators in countries such as the UK
ASMR IV ratings do not trigger a net increase in
and France have implemented new rules designed
health system costs17. As a result, some medicines
to close down unregulated launch price avenues or
with ASMR IV ratings and generic comparators
render them less attractive.
have faced protracted price negotiations. One
notable example is Novartis’s heart failure drug
Low HTA scores weaken the hand of
Entresto (sacubitril + valsartan). The drug was
manufacturers during price negotiations
approved by the EMA in 2015 and despite a National
The outcome of health technology assessments
Health Authority (HAS; Haute Autorité de Santé)
has a direct bearing on prices in several 5EU
assessment conducted in 2016, it still has no price
countries. As such, increasingly conservative
listing.
benefit scores being chalked up by HTA agencies

“Entresto tried to get a premium price because the comparator is enalapril, and they
said well you should have enalapril plus something, but something small, and of course
it is not doable, and for this reason Entresto has not yet an official price.”
Former French national payer

17. MASS (2016) Prise en charge des médicaments à l’hôpital : précisions sur le décret « liste en sus ». Available from: http://solidarites-sante.gouv.fr/
archives/archives-presse/archives-breves/article/prise-en-charge-des-medicaments-a-l-hopital-precisions-sur-le-decret-liste-en [Accessed 12 August
2018].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 15

Free pricing periods are the focus of growing
criticism in Germany
German payers are increasingly unhappy with rules
that oblige them to fund the provision of costly
drugs at the manufacturer’s chosen price for 12
months following launch – especially where the
Federal Joint Committee (G-BA; Gemeinsamer
Bundesausschuss) has been unable to quantify
the degree of additional benefit offered by such
products. This is a particular issue for orphan drugs,
in respect of which the G-BA is frequently unable
to quantify additional benefit levels, but the free
pricing rule also means German payers were heavily
exposed to the initial cost of reimbursing new-
generation hepatitis C treatments.
Where payer spending on the reimbursement of
orphan drugs exceeds €50m ($58m), full benefit
assessments are undertaken. These have delivered
mixed results, with some high-profile products such
as Imnovid/Pomalyst (pomalidomide; Celgene)
and Imbruvica (ibrutinib; AbbVie/Johnson &
Johnson) deemed to offer no additional benefit
over existing therapy in some subsections of the
patient populations they target18. The outcome
of such assessments has strengthened calls for a
more restrictive approach to the reimbursement
and pricing of rare disease treatment in Germany,
including a reduction in – or even the outright
abolition of – free pricing periods for orphan drugs.
Measures designed to prevent a repeat of the
situation faced by payers following the launch
of new-generation hepatitis C treatments were
contained in early drafts of the Pharmaceutical
Market Reorganization Act (AMNOG;
Arzneimittelmarktneuordnungsgesetz) reform
package adopted in 2017. Where a new drug
generated payer spending of more than €250m
($290m) before the 12-month free pricing period
had elapsed, this would have seen prices negotiated
by manufacturers and health insurance funds
applied retrospectively, from the point at which that
threshold was exceeded. The provision was removed
from the final version of the 2017 reform package,
which was ratified in May 2017 as the Act to
Strengthen Pharmaceutical Supply in the Statutory
Health Insurance System (AM-VSG)19. However,
the calls for introduction of retrospective rebate
are likely to be repeated, with a lower threshold
affecting a larger number of medicines on the cards.

“The next loophole that gets closed is the orphan drug loophole. I am not sure
whether it is in two years or four years, but that will happen”
German payer

“I think 250 million is not realistic if this regulation comes back,

and it will come back, for sure.”
German regional payer

18. Ecker & Ecker (2017) Benefit assessment archives. Available from: https://www.ecker-ecker.de/english/benefit-assessment-archive.html [Accessed 9
May 2018].
19. Bundesanzeiger Verlag (2017) Gesetz zur Stärkung der Arzneimittelversorgung in der gesetzlichen Krankenversicherung. Available from: https://www.
bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&start=//*%5B@attr_id=%27bgbl117s1050.pdf%27%5D#__bgbl__%2F%2F*%5B%40attr_
id%3D%27bgbl117s1050.pdf%27%5D__1534184606255 [Accessed 13 February 2019].

16 / March 2019 © Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)

Disparate approaches to orphan HTA
are splintering access to rare disease
treatments
Conducting meaningful assessments on rare disease
treatments has always been difficult, given the
often limited nature of clinical data to support such
reviews, and the frequent absence of traditional,
explicit clinical endpoints traditionally used by HTA
agencies to inform their assessments. Coupled
with the fact that national approaches to orphan
drug HTA vary widely, this has driven a significant
degree of divergence where the outcome of national
assessments is concerned, which has had a growing
impact on market access for rare disease treatments
in Europe. The fate of Vertex Pharmaceuticals’ cystic
fibrosis drug, Orkambi (lumacaftor + ivacaftor),
highlights the impact that national approaches
to HTA can have on the availability of rare disease
treatments (see the box).
With spending on orphan drugs increasing rapidly,
and with revolutionary new treatments for rare
diseases nearing the market, this is an area where
further change is likely to be witnessed. HTA has
already begun to pose a stiffer challenge for many
orphan drugs in the UK, where NICE has been
handed broader responsibilities in the sector, and
where new cost-effectiveness thresholds have been
introduced for some rare disease treatments. Calls
for the imposition of tighter scrutiny on orphan
drugs are also growing in Germany, where existing
rules mean rare disease treatments are not required
to undergo full health technology assessments.

ORKAMBI CASE STUDY

Granted EU marketing authorization in November 2015, Orkambi began generating sales in

Germany – where the G-BA concluded that it offered “considerable additional benefit” to cystic
fibrosis patients with specific gene mutations targeted by the product – at an early stage in
201620. More than two years later, Vertex was still struggling to obtain NHS coverage for Orkambi
in the UK, where NICE had concluded in March 2016 that the product was not a cost-effective
treatment option21. The rejection was followed by a protracted negotiation between NHS England
and Vertex, which culminated in the company’s rejection of a portfolio coverage deal put forward
by NHS England in July 2018. The deal would have allowed for immediate and expanded access
to Kalydeco (ivacaftor) and Orkambi, as well as immediate access to Symdeko (tezacaftor +
ivacaftor) from the date it is licensed, for which Vertex would have been reimbursed £500m over
five years. In its rejection of the offer, Vertex highlighted that this would have worked out at only
£14,000 per patient per year, which would have been equivalent to a 90% discount to the German
price22. The deadlock in negotiations continues despite the case having been referred to Parliament.

20. Business Wire (2016) Vertex announces German reimbursement agreement for Orkambi (lumacaftor/ ivacaftor), the first medicine to treat the
underlying cause of cystic fibrosis in people aged 12 and older with two copies of the F508del mutation. Available from: https://www.businesswire.com/
news/home/20161219005381/en/Vertex-Announces-German-Reimbursement-Agreement-ORKAMBI%C2%AE-LumacaftorIvacaftor [Accessed 4 May
2018].
21. EPR (2016) Orkambi’s cost too high for benefit offered, says NICE. Available from: https://www.europeanpharmaceuticalreview.com/news/41774/
orkambi-cystic-fibrosis-nice/ [Accessed 4 May 2018].
22. Pink Sheet (2018) NHS England Offers Vertex Final Orkambi Deal. Available from: https://pink.pharmaintelligence.informa.com/PS123522/NHS-
England-Offers-Vertex-Final-Orkambi-Deal [Accessed 12 November 2018].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 17

Funding issues are driving use of new prioritization criteria, and dedicated funds.
cost-containment tools While the arrival of further competing products
European payers have gritted their teeth and
handing payers greater leverage in pricing
stumped up funds to bankroll coverage for a
negotiations and reducing patient numbers has
growing number of pricey rare disease treatments.
all but eliminated the challenge, the funding
They have done so secure in the knowledge that,
crisis created by the launch of DAAs has led to the
while per-patient treatment costs for these drugs
creation of new financial tools designed to moderate
may be extremely high, small patient cohorts mean
the budget impact of innovative medicines. These
their overall impact on pharmaceutical budgets
novel tools, such as budget ceiling agreements,
is manageable. Payers were caught out by the
have now been agreed for immunotherapies in
arrival of new direct-acting antiviral (DAA) drugs for
France, while payers in Italy are also foregoing the
the treatment of hepatitis C virus (HCV) infection
more complex risk-sharing deals in favor of price-
in the early part of this decade, however, and
volume agreements. Regulatory changes could
struggled to cope with the implications of funding
pave the way for more widespread use of price-
products that carried not just a sizable price tag,
volume agreements in Germany, while in the UK the
but also indications for use in a much larger patient
introduction of the £20m budget impact test could
population. In an effort to allow access to those
be construed as a way of UK payers trying to avoid
most in need of treatment without breaking the
another hepatitis C-like crisis.
bank, European payers have resorted to a range of
tools, including managed entry agreements, patient

“There is a target from the minister of the budget not to go beyond €700m for all the
PD-1s, like we have done for hepatitis C, so it is very similar.”
Former French national payer

“We will try to implement mechanisms which are giving us more flexibility on pricing,
so price-volume contracts, maybe hidden rebates on a national level if a certain
volume threshold is hit.”
German regional payer

18 / March 2019 © Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)

Budget impact test could delay UK market access
for one in five new drugs
Under normal circumstances, the NHS is required to
make new drugs available not more than 90 days
after the publication of a positive NICE technology
appraisal. But under new rules adopted in April
2017, one in every five new drugs could now face
much lengthier market access delays and greater
squeezes on price.
The new rules introduced a budget impact test,
which will apply to any drug deemed cost-effective
by NICE but forecast to increase net NHS spending
by more than £20m ($26.6m) in any of the first
three years in which it is funded. Products expected
to generate spending in excess of that threshold
will be subject to separate negotiations between
manufacturers and NHS England (NHSE) before
routine commissioning commences. Where these
fail to elicit an agreement under which a product
would generate net annual spending of less than
£20m ($26.6m), NHSE may request “a variation
to the statutory funding requirement”23. In effect,
this is likely to involve the phased introduction of
funding for a drug, limiting its availability for up to
three years in a bid to mitigate the impact on NHS
finances.
By NICE’s own admission, the new budget impact
threshold is likely to trigger additional negotiations
on around one in five new drugs, but the watchdog
has said it hopes commercial agreements between
companies and NHSE will minimize or, in some
cases, avoid completely the need to delay access
to a new drug24. What is clear though is that the
route to securing market access in the NHS has only
got tougher, as well as longer, with new haggling
expected not only around the suitability of the
cost-effectiveness models but also reliability of
projections of patient numbers, treatment duration,
as well as overall impact on the patient pathway.
So far, only one drug affected by the budget impact
test has emerged through the price negotiation
following failure to pass the £20m budget impact
test; Merck & Co’s Keytruda (pembrolizumab) for
first-line PD-L1-positive non-small cell lung cancer.
Any details of the outcome other than its inclusion
in routine commissioning are lacking, but it is likely
Merck & Co had to agree to a substantial price
concession.

“I think the lessons that I would give would be do not forget the ‘I’ in the middle
of that budget impact test, ‘I’ stands for impact, so it is not how much your drug
is going to cost, it is the extra cost of your drug’s effect on the pathway, and to be
brutally realistic about what that is.”
NHS England payer

23. NICE (2018) Budget impact test. Available from: https://www.nice.org.uk/about/what-we-do/our-programmes/nice-guidance/nice-technology-

appraisal-guidance/budget-impact-test [Accessed 16 May 2018].
24. Prescriber (2017) How will NICE’s budget impact test affect new drug availability? Available from: http://www.prescriber.co.uk/wp-content/uploads/
sites/23/2017/08/NICE-budget-impact-EB-edit-lsw.pdf [Accessed 16 May 2018].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 19

New rules jeopardize funding for some hospital
drugs in France
Since 2004, costly inpatient drugs have been funded
through an initiative designed to enable their use
in hospitals reimbursed via diagnosis-related group
(DRG) payments. Products that qualify for funding
through this route are contained on a schedule
known as the “liste en sus”, which allows for use of
the drugs that would not otherwise be covered by
the DRG tariff. Spending on the initiative has risen
sharply since the beginning of this decade, and
in 2016 – in a move designed to generate annual
savings of €205m ($237.6m) – regulators amended
conditions governing the inclusion of drugs on the
list25.
Under the new rules, drugs with comparators that
do not already feature on the liste en sus may only
be included if they have obtained an SMR rating of
either “important” or “major” and an ASMR rating of
I–III. Cancer drugs delivered in the hospital setting
were particularly hard hit, with Amgen’s multiple
myeloma drug Kyprolis (carfilzomib) achieving
a listing only in July 2018, over 2.5 years after it
received the European marketing authorization. The
listing success occurred following submission of
more mature data demonstrating an overall survival
benefit and an upgrade in ASMR from IV to III.
Conditions attached to funding for products
already on the list were also tightened, triggering
the removal of several high-profile brands with
treatment costs significantly higher than the
average in their specified indications (see the box
below)25.

“If you get an ASMR IV you would be reimbursed on paper but you would have no
access because the recommendations would not be followed on top of the DRG.”
Former French national payer

FIRST CASUALTIES OF THE LISTE EN SUS REMOVALS

Pfizer’s leukemia drug Zavedos (idarubicin) and United Therapeutics’ pulmonary arterial
hypertension treatment Remodulin (treprostinil) were removed completely from the liste en sus
in the first half of 2016, along with four other products. Later in that year, hospital funding for
several cancer drugs was withdrawn – this time partially, on a per-indication basis. The move dealt
a particular blow to Roche and Janssen. Roche saw liste en sus funding for three indicated uses
of Avastin (bevacizumab) terminated, while subsidies for Herceptin (trastuzumab) were trimmed.
Like Avastin and Herceptin, Janssen’s Velcade (bortezomib) and Caelyx (pegylated doxorubicin)
remained on the liste en sus, but with funding restricted to fewer indications25.

25. Stratégique Santé (2016) De nombreuses radiations pour la liste en sus. Available from: https://strategique-sante.fr/wp-content/uploads/2016/09/
Article-4-De-nombreuses-radiations-pour-la-liste-en-sus-.pdf [Accessed 16 May 2018].

20 / March 2019 © Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)

Emerging Markets
Payers tighten their belts as economic growth slows

In the past decade, governments in many of the leading emerging markets have implemented
reforms aimed at improving access to healthcare for their populations. Typically, as far as drug
coverage is concerned, public healthcare programs focus on the provision of free or heavily
subsidized generics, reflecting the limited nature of budgets available to underpin public sector
reimbursement. As a result, patients are still heavily exposed to pharmaceutical costs in most
emerging markets, and measures to cut out-of-pocket spending on medicines are often an integral
feature of reforms designed to improve access to healthcare. While these include expansion of
subsidized access to more innovative medicines, drug prices have also been a frequent target of
cost-containment initiatives across several emerging markets.

The rollout of drug coverage initiatives in many
emerging markets was announced or embarked
upon during periods of strong economic growth.
Even then, costs associated with these schemes
were daunting. Now, with many emerging
economies slowing – and some struggling to recover
from recent periods of recession – that challenge
has been magnified. Funding issues have already
delayed the rollout of planned reimbursement
initiatives in some countries, and pose a threat
to the long-term viability of schemes rolled out
recently in others. As a result, efforts to limit costs
associated with expanded access to medicines are
being stepped up.
Prescribing controls and the imposition of strictly
defined patient populations may both help to limit
reimbursement costs. The price of medicines funded
by governments or social health insurance programs
can also help to maximize the impact of finite
budgetary resources however, and where access to
new drugs is being broadened, pressure on prices is
increasing.

Figure 6: Key forces shaping access in emerging markets

Growing patient demand for access to Economic slowdown limits expansion

healthcare and innovative treatments of subsidized drug programs

Growth in public reimbursement programs

Expansion of public healthcare programs
puts pressure on medicines’ prices and
over the past decade
drives greater prescribing controls

Inadequate funding limits prescribing

Inclusion of innovative medicines in some
of innovative brands included on
subsidized medicines programs
reimbursed drug lists

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 21

Pressure on new drug pricing is health technology assessments (HTAs), and the use
of managed entry agreements (MEAs).
increasing
New drug prices in many emerging markets
Some of these approaches are potentially beneficial
have traditionally been free from explicit
for originators, since they encourage more
regulatory control. That remains the case in some
widespread reimbursement of costly new drugs.
countries, but the prevailing trend is towards
Expertise required to conduct HTAs is limited in
a more interventionist approach – especially
many emerging markets however, and there is
where governments are footing the bill for the
a danger that the approach will be used in some
reimbursement of innovative medicines. This has
countries as a tool with which to lever down prices
seen existing public sector purchasing mechanisms
rather than to gauge the true value of innovative
overhauled in a bid to lever down procurement
drugs to patients and healthcare systems. The
prices, while the imposition of ceilings on the price of
negotiation of meaningful MEAs will also be
new drugs, often set via reference to those in other
problematic in countries where accurate monitoring
countries, is increasingly widespread. More recently,
of real-world data is either difficult or impossible,
policymakers in some emerging markets have
and agreements will be dominated in the near term
begun to adopt some of the strategies employed by
by relatively straightforward, finance-based deals
governments and payers in developed healthcare
which cap prices or overall reimbursement liabilities.
systems, including pharmacoeconomic analysis,

Figure 7: Policies shaping pricing dynamics in emerging markets

• Widely employed but the size and nature of reference-country baskets

External reference employed varies.
pricing (ERP)
• Price is often set at the lowest price prevailing in any reference country.

• An emerging tool in countries where governments are attempting to

provide subsidized access to more new drugs.
Managed entry
agreements (MEAs) • Most are simple financial agreements as the systems and procedures
required to collect outcomes data are often either rudimentary or
completely lacking.

• Some countries are turning to use of HTA and pharmacoeconomics to

Health technology inform their coverage decisions, but most are in early stages.
assessment (HTA) • Wider HTA use could impose stronger pressure on some new drug
prices, and threaten existing drug reimbursement.

• Government-linked procurement agencies are an established feature

Public sector of several emerging Asian and South American markets.
procurement • Pressure on prices is ramped up through consolidated procurement for
the supply of public hospitals.

22 / March 2019 © Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)

Public formulary access can be a years, in China in particular. That trend looks set to
continue – partly because governments are under
lengthy, complex process growing pressure to improve access to innovative
Most emerging-market countries are still
products, but also because measures designed to
predominantly self-pay pharmaceutical markets,
limit or manage the budgetary impact of new drug
and gaining access to public sector formularies
reimbursement listings have been put in place,
poses a difficult, often complex challenge for
reassuring regulators that coverage of specific
originators. The scarcity of funds available to
products will not impose unsustainable pressure on
underpin subsidized medicines provision militates
reimbursement budgets.
heavily against the widespread listing of costly
patented drugs, and while listing procedures may
Coverage is often partial, however, posing
involve the consideration of other factors on paper,
affordability issues for many patients. Access may
cost is often the main determinant of formulary
also be reserved for the inpatient setting, with
inclusion in practice.
out-of-pocket purchases still key for drugs used
outside of hospitals. And while catastrophic drug
National formularies are typically restrictive, with
funds provide controlled access to some high-
many based largely on the WHO’s model lists of
cost products, typically, these provide access to
essential medicines, and are subject to delayed
treatments for a strictly defined range of conditions
updates. Comprehensive access to public sector
and patient populations.
formularies may also be complicated by the multi-
layered nature of responsibility for medicines
Patients in some countries have turned to the
provision, and hospital compliance with national or
courts, arguing that the refusal of governments or
regional listings varies, with drug inclusion subject to
payers to reimburse a particular product breaches
delays or lack of appropriate funding.
their constitutional right to health. This poses
additional challenges for payers attempting to
Notwithstanding the challenges involved in gaining
prioritize the use of scarce healthcare funding
access to public sector reimbursement, the number
resources. As a result, policymakers have begun to
of innovative, patented medicines contained on
push back. In Brazil, the Supreme Court has raised
major public formularies has increased appreciably
the bar for lawsuits seeking access to medicines.
in some emerging markets over the past five

CHINA: PRICE NEGOTIATIONS HAVE PAVED THE WAY FOR A SLEW OF NRDL LISTINGS

In February 2017, the National Reimbursement Drug List (NRDL), which shapes provincial and local
medicines coverage, was updated for the first time since 2009. Shortly after the February 2017
NRDL update, regulators published a list of 44 more high-cost drugs selected for national price
negotiations. Agreements were reached for 36 of the 44 products involved and, in July 2017, the
government announced the addition of those drugs – including more than 20 multinational brands
– to List B of the NRDL. More than half of the 36 products were oncology or immune-modulating
drugs, and the list included around a dozen multinational cancer brands26. The July 2017 NRDL
listings were granted in return for price cuts averaging 44%, though some prices were up to 70%
below those prevailing prior to the national negotiation process27. 2018 saw 15 more oncology
multinational brands added to the NRDL28.

26. Pharmaceutical Executive (2018) China expedites price reduction of anticancer drugs. Available from: http://www.pharmexec.com/china-expedites-
price-reduction-anticancer-drugs [Accessed 5 November 2018].
27. FT (2017) China slashes prices of patented western drugs by up to 70%. Available from: https://www.ft.com/content/ef1566be-6c7b-11e7-bfeb-
33fe0c5b7eaa [Accessed 31 October 2018].
28. SSRI (2018) 17 cancer drugs added to insurance program list. Available from: https://www.ssri.com/china/e/medicalnews/332/ [Accessed 15
November 2018].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 23

Private formularies are key early
targets for innovators
The restrictive nature of public sector
reimbursement means private formularies have
traditionally been the main initial target for
originators in emerging markets. Reimbursement
by private payers is often limited, however, and
while private providers generally take a liberal
approach to new drug listings, patient finances act
as a significant constraint on demand for costly
medicines.
The private insurance market in many emerging
economies is limited in terms of sophistication as
well as size. Private cover often involves the provision
of a lump-sum payment for the treatment of serious
health conditions, and payers do not operate explicit
drug formularies. Where private payers do operate
their own formularies, these are used predominantly
as a cost-containment tool, rather than as a means
through which to attract affiliates. As a result,
private payer formularies are often almost identical,
and are seldom expanded voluntarily.
Instead, inclusion on high-end private hospital
formularies is the main early goal of originators
seeking market access for new drugs. This often
24 / March 2019
presents few barriers, since patients seeking
treatment in these establishments have high
expectations where standards of provision are
concerned, while drug sales generate income
for private hospitals. However, private hospital
formularies tend to vary dramatically within
individual markets, reflecting differences in the
patient populations targeted by individual facilities.
Market access outlook across major
emerging markets offers a mixed
picture
Out-of-pocket spend and private formularies
will remain the key access routes for high-cost
innovative drugs in emerging markets, despite
efforts to expand public sector reimbursement
in many countries. While access to subsidized
medicine programs is still challenging in most
emerging markets, there are definite signs that
innovative new drugs will be reimbursed more
widely in several countries as a result of MEAs –
provided both regulators and manufacturers are
willing to give some ground. China is substantially
ahead of most other emerging economies where
improving public market access is concerned, and
has witnessed several rapid changes over the past
couple of years.
© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)
 Outlook Positive Neutral Negative

Figure 8: Access outlook in subsidized medicine provision across key emerging markets

Country New drug pricing New drug reimbursement Formulary access

Brazil Few new drugs are able to
achieve premium pricing
International referencing will
limit launch prices
Permitted annual price hikes for
patented drugs will lag inflation
CONITEC will continue to pursue a
highly restrictive approach to new
drug reimbursement listing
Access to costly new drugs through
the courts will become more
challenging
MEAs could pave the way for an
increase in the proportion of new drugs
granted access to the RENAME
Pressure on private payer finances will
rule out more expansive approaches to
private formulary listing

Russia International referencing
will limit the maximum ex-
manufacturer price of drugs
included on the EDL
Obtaining approval for currency-
based adjustments to EDL prices
is challenging
India Caps on the price of more
prominent multinational brands
will be triggered by future
expansion of the NLEM
Pressure on the government to
regulate patented drug prices
will continue to grow
China National prices have been
negotiated for a slew of
innovative originator products
since the beginning of 2017
Mexico Public sector prices for patented
drugs are set via negotiation
with the CCNPMIS
Indonesia Substantial discounts or
bonusing commitments will
be required to secure access
to the national formulary and
e-catalogue, which inform
public sector prescribing and
procurement
Turkey Restrictive rules – and ad hoc
adjustments to the way they are
applied – will continue to limit
prices achieved by new drugs
seeking reimbursement through
traditional channels
Few innovative new drugs will be
reimbursed under existing federal
and state schemes
The rollout of a national outpatient
drug reimbursement scheme has
been delayed
Where subsidized pharmaceutical
provision exists, it will be confined
almost exclusively to low-cost,
multi-source drugs
National price negotiations are
paving the way for the inclusion of
patented multinational brands on
List B of the NRDL
The new State Medical Insurance
Administration will identify more
candidates for inclusion on the
national list
Pressure on public payer budgets
has driven a highly restrictive
approach to the reimbursement of
expensive new drugs
Delays in inclusion of new drugs on
the national formulary will continue
Requests for inclusion on the
reimbursement schedule will
not be accepted directly from
manufacturers
A new procedure allows for the
negotiation of MEAs, exempting
affected products from normal
pricing and reimbursement rules
Access to off-label use of patented
drugs is becoming more restrictive
Additions to the ONLS and VZN
formularies were announced in the run-
up to the 2018 presidential election.
Coverage of three additional conditions
will be provided by the VZN from 2019
The NLEM remains a formulary on which
originators would rather their products
did not appear, since inclusion triggers
the imposition of price caps
Provincial reimbursement formularies
have been updated rapidly in the wake
of recent NRDL revisions
Poorer provinces will struggle to fund
the reimbursement of some NRDL
drugs, and will remain less extensive
than those in more prosperous areas of
the country
Catalogue II of the IMSS formulary,
which lists costly, innovative medicines
reimbursed by the institute, contains
only 24 molecules
MEAs could pave the way for the
inclusion of more new drugs on major
public formularies
The FORNAS, which determines access
to medicines under the new NHI
scheme, was updated at the beginning
of 2018, triggering the first-time
inclusion of several patented brands
MEAs will encourage the inclusion of
more innovative products on the SGK’s
positive list
Imported patent-expired brands will
face the risk of exclusion from the
positive list

CCNPMIS = Comisión Coordinadora para la Negociación de Precios de Medicamentos e Insumos para la Salud; CONITEC = Comissão Nacional
de Incorporação de Tecnologias no Sistema Único de Saúde; EDL = Essential Drugs List; FORNAS = Formularium Nasional; MEAs = managed
entry agreements; IMSS = Instituto Mexicano del Seguro Social; NLEM = National List of Essential Medicines; NRDL = National Reimbursement
Drug List; ONLS = outpatient coverage scheme for vulnerable patients; RENAME = Relação Nacional de Medicamento Essenciais; SGK = Sosyal
Güvenlik Kurumu; VZN = orphan drug coverage scheme

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 25

Brazil: CONITEC remains the key gatekeeper for
public reimbursement
Gaining access to public sector reimbursement
for new drugs remains difficult in Brazil, reflecting
the restrictive approach pursued by the country’s
HTA agency, the National Committee for Health
Technology Incorporation (CONITEC; Comissão
Nacional de Incorporação de Tecnologias no
Sistema Único de Saúde). While pressure on
policymakers to fund access to more innovative
medicines is intense, CONITEC still counseled
against coverage for around half of all the drugs it
reviewed during the first 10 months of 201829. That
figure would have been significantly higher, but
for a deal struck by regulators and manufacturers
towards the end of 2017 which cleared the path for
reimbursement of several new-generation hepatitis
C treatments30. Lucky recipients of CONITEC’s
positive recommendations in 2018 also included
Pfizer’s familial amyloid polyneuropathy drug
Vyndaqel (tafamidis), and Stelara (ustekinumab;
Johnson & Johnson/Mitsubishi Tanabe), Cosentyx
(secukinumab; Novartis), and Humira (adalimumab;
AbbVie/Eisai) for the second-line treatment of
psoriasis. The number of applications rejected by
CONITEC remained lengthy, however, and included
requests for new indications of existing products as
well as innovative medicines29.
Russia: still no sign of a national reimbursement
scheme
Plans for the phased introduction of a national
outpatient drug reimbursement scheme were
announced during the first half of this decade. These
envisaged that the initiative would be piloted in
several regions during 2015 and 2016, and that it
would be rolled out nationally between 2017 and
2020. The financial crisis which hit the country in
2014 and 2015 put paid to those plans, however,
and rollout of the scheme has yet to begin. In the
meantime, it has been estimated that fewer than 20
million of Russia’s 140 million-plus citizens possess
comprehensive outpatient drug coverage31. Of these,
most access subsidized medicines through regional
programs rather than federally funded initiatives.
Despite the 2018 expansion of the VZN (Seven
Nosologies Program) to cover medicines to treat
hemolytic uremic syndrome, juvenile arthritis, and
mucopolysaccharidosis, the addition of new drugs
or conditions to this list is unlikely given the current
economic situation32.
India: shifting from a static to a dynamic essential
drugs list
In 2018, the Indian government announced
the establishment of a new committee that will
oversee the next update of the National List of
Essential Medicines (NLEM). Significantly, it has been
appointed for an initial term of three years, during
which time it will meet every six months to discuss
potential revisions to the list33. This indicates a shift
away from the publication of periodic lists that are
set in stone for several years, to a more dynamic
approach under which more timely updates will be
implemented.
With no discernible improvement in public funding
for innovative medicines, the main implication
for originators will be the potential impact of this
change on the price of branded specialties, a
growing number of which could be subject to price
caps and regulated price adjustments. Campaigners
seeking affordable access to innovative medicines
have called for the inclusion of all patented drugs
on the NLEM. With alternative approaches to the
regulation of patented drug prices also being
discussed34, that appears unlikely, but the number
of costly original brands included on the NLEM is
expected to increase progressively through the
remainder of this decade.

29. CONITEC (2018) Recommendations on technologies evaluated – 2018. Available from: http://conitec.gov.br/decisoes-sobre-incorporacoes [Accessed

1 November 2018].
30. MS (2017) Brasil anuncia plano nacional para eliminação da hepatite C até 2030. Available from: http://portalms.saude.gov.br/noticias/agencia-
saude/41758-brasil-anuncia-plano-nacional-para-eliminacao-da-hepatite-c-ate-2030 [Accessed 31 October 2018].
31. Rudisill C, Vandoros S, Antoun JG (2014) Pharmaceutical policy reform in the Russian federation. Available from: https://www.ncbi.nlm.nih.gov/
pubmed/24603082 [Accessed 2 November 2018].
32. Russia News Today (2018) The expert told about the law expands the list of rare diseases. Available from: https://chelorg.com/2018/08/08/the-
expert-told-about-the-law-expands-the-list-of-rare-diseases/ [Accessed 2 November 2018].
33. The Times of India (2018) Essential list of medicines to be revised: medical devices and consumables may be included. Available from: https://
timesofindia.indiatimes.com/business/india-business/essential-list-of-medicines-to-be-revised-medical-devices-and-consumables-may-be-included/
articleshowprint/65000339.cms [Accessed 14 November 2018].

26 / March 2019 © Informa UK Ltd 2019 (Unauthorized photocopying prohibited.)

Mexico: originators pursue new MEA models
To date, offering substantial discounts has been
the only way to gain access to major public payer
reimbursement lists. Manufacturers are keen to
begin striking more sophisticated risk-sharing deals
with payers however, including outcomes-based
agreements that could ease pressure on purchasing
prices.
In December 2017, the national association
representing research-based manufacturers (AMIIF;
Asociación Mexicana de Industrias de Investigación
Farmacéutica) signed an agreement with the state
government of Querétaro, under which market
access models for innovative specialty medicines
will be developed. Manufacturers say the Social
Security Institute (IMSS; Instituto Mexicano del
Seguro Social) has also responded positively to the
proposed development of outcomes-based deals35.

This analysis is based on Datamonitor Healthcare’s

Market Access reports.

For full coverage please follow the links below:

• Datamonitor Healthcare’s Market Access Trends in Europe
• Datamonitor Healthcare’s Access Trends in Emerging Markets
• Datamonitor Healthcare’s Value-Based Reimbursement in the US
• Datamonitor Healthcare’s Drug Pricing in the US

34. PhRMA (2018) PhRMA special 301 submission 2018. Available from: https://www.phrma.org/policy-paper/phrma-special-301-
submission-2018 [Accessed 8 October 2018].
35. MBP (2018) Increasing access through new financial models. Available from: https://issuu.com/mexicobusinesspublishing/docs/mhr_2018_book_
complete [Accessed 7 November 2018].

© Informa UK Ltd 2019 (Unauthorized photocopying prohibited.) March 2019 / 27

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